Chairman admits nerves as RusHydro lists on London exchange

The head of RusHydro, the world's second largest hydropower producer, admitted to nerves while awaiting the first trades of his company's Global Depositary Receipts (GDR) on the London Stock Exchange.

RusHydro acting Chairman Vasily Zubakin was in London to mark the launch and opened trading on the exchange July 6, 2009. He was more relaxed in a meeting with reporters following the opening, saying that the first few trades had settled his nerves and that trading in the 0.38-0.39 euro (US$0.53-0.54) range was in line with pricing on the two Russian exchanges on which RusHydro trades.

Zubakin said the decision to pursue a London listing reflected the company's desire to tap into a large potential liquidity pool by making it easier for international investors to obtain RusHydro securities.

"We think that this move will significantly boost the liquidity of our depository receipts and that the listing will help spur our development from a Russian blue chip company into a global emerging markets blue chip," he said.

Russia's biggest electricity producer, RusHydro also is the world's largest publicly traded hydropower company with installed capacity of 25,300 MW. It intends to grow its other renewable energy generation activities and already has interests in wind, geothermal, and tidal power plants. Zubakin indicated that, despite receiving many offers, the company had no ambitions to expand into fossil fuel generation and that RusHydro would remain a "clean energy" company.

The Russian government currently has a 61.93 per cent stake in RusHydro, but Zubakin said, in his personal opinion, he could see no problem with this being reduced to 50 per cent plus one share at some time.

"This would not represent any sell-off of Russian strategic assets but the US$3 billion to US$5 billion created by such an IPO (initial public offering) would be beneficial for future investment plans, such as expansion of the wind generation portfolio," he said.

Chairman sees bright prospects

Although RusHydro is the first Russian company to come to the London market since the start of the economic crisis, Zubakin believes prospects for the company and its shareholders are bright.

"I believe we have a strong potential for growth and, dependent on the outcome of the Copenhagen climate change talks in December this year, the prospects for building sustainable power plants could be enhanced," he said. "As the environmental legislation becomes tougher, the risk for our shareholders is lowered."

Zubakin said RusHydro has been making efforts to counter the opposition to large-scale hydropower plants that exists in various quarters of the environmental lobby. He said a recent meeting of the e8 group of industrialized nations' electricity producers had endorsed large hydro as environmentally friendly.

RusHydro was established in December 2004 as part of the comprehensive reform of Russia's power industry which led to the liquidation of former monopoly power company RAO UESR in 2008. It brought together the vast majority of Russia's hydropower assets and now owns 53 hydropower plants and one pumped-storage hydro plant, second in size only to Canada's province-owned Hydro-Quebec. (HydroWorld 6/23/09) In 2008, the company's total electricity generation amounted to 80.3 TWh with revenues amounting to 107.7 billion rubles (US$3.4 billion).

RusHydro's GDR program was launched in June 2008 with the Bank of New York (now Bank of New York Mellon) acting as depository. The volume of GDRs issued has increased from 2.13 per cent of the company’s charter capital to the present level of about 6.17 per cent. Russian market permission has been granted for this to be increased up to 14.7 per cent of capital.

RusHydro is involved across the entire electricity supply chain in Russia from plant design and construction through to supply of electricity to consumers. It has not been adversely affected by the deep economic crisis that has left Russians using 6 per cent less electricity, largely because power produced by RusHydro is among the cheapest available to the Russian System Operator and therefore its production is generally required.